Annual Report 2006
Executive Report
Ed Pratt
Chairman of the Board
We are pleased to report that 2006 was a very good year for Midwest Energy. Your Company took several steps toward our Vision and Mission of becoming “the premier regional provider of safe, reliable energy products and services, working to improve the lives of our customer-owners.” We worked more safely, grew our customer base, began to secure new, long-term power supplies, restored the viability of our natural gas business and remained the leading Kansas utility in helping our customers to conserve and use energy efficiently.
Safety
The numbers tell part of the story. Our three most important employee safety measures are 1) lost-time accidents, 2) medical referrals and 3) avoidable vehicle accidents. On all three counts we met or exceeded our targets for improvement. Our 265 employees experienced one lost-time accident, five medical referrals and six avoidable vehicle accidents. We want these numbers to be zero of course. However, given that we worked over 512,000 man-hours in 2006, we congratulate our employees on this achievement.
Earnie Lehman
President and General Manager
Our recognition by Kansas Governor Kathleen Sebelius and the federal Occupational Safety and Health Administration (OSHA) signals an important step in our journey toward a “culture of safety”. Our receipt of the Safety and Health Achievement Recognition Program (SHARP) award for 22 company facilities validates that safety doesn’t just happen at Midwest Energy. We work hard to make it happen.
Growth
Midwest Energy continued its long history of measured growth in 2006. We added almost 1,400 customers with the purchase of the Oakley electric and Bunker Hill gas distribution systems. We now serve 90,000 electric and gas customers, further strengthening our ability to operate efficiently, provide more reliable service, and minimize costs. We seek further opportunities for growth and partnership that will provide tangible benefits to our customers.
Power Supplies
Midwest Energy entered a critical phase of its multi-year plan to secure new, long-term power supplies in 2006. We conducted a thorough assessment of the options available to provide baseload coal-fired generation, peaking and intermediate gas-fired generation and renewable energy to our customers. We committed to purchase 75 MW (less than one-fourth of our total long-term needs) from Sunflower Electric Power Corporation’s planned Holcomb 2 power plant. Unnecessary and politically driven delays in the permitting of Holcomb 2 will cause our cost of electricity to grow significantly in future years.
Our competitive bid process unearthed other options for power supplies. Some, such as our decision at year-end to build the 75 MW gas-fired Goodman Energy Center near Hays, are now being implemented. We will have much more to say about Goodman as we begin building it in 2007 and bring it online in 2008. Other options remain under consideration and negotiation. In general, we believe our customers will continue to benefit from Midwest Energy’s ability to contract with multiple power providers.
As 2006 ended we were still negotiating with the winning bidder for providing wind energy. We can now report Midwest Energy has contracted for 25 MW from the Smoky Hills Wind Farm straddling the Lincoln/Ellsworth County line adjacent to our most important transmission line. Midwest Energy will add an additional 25 MW of wind energy by the summer of 2010, most likely through another competitive bid process.
Natural Gas
Average gas bills for Midwest Energy customers dropped in 2006. We were fortunate to see a reversal of high natural gas prices in 2006, even though they remain well above historic levels. The erosion of our gas irrigation customer base leveled off as natural gas again became competitive with diesel, propane and electric alternatives. We made a difficult decision to leave the appliance servicing and installation business offered in parts of our service territory, allowing us to provide regulated gas service more efficiently. We also increased our gas delivery rates for only the second time since 1995. These steps and others allow us to provide reasonably-priced service in rural areas that would not normally have the option of receiving processed natural gas.
Energy Efficiency
Midwest Energy serves its customers best by individually helping them to conserve and use energy as efficiently as possible. Unlike most other utilities, we want to reduce customer energy bills, not just control rates. Long after other utilities abandoned their efforts to work directly with customers, Midwest Energy continued and even expanded its efforts. For example, we have been recognized for our collaboration with the City of Hays in the mandatory inspection and leak testing of new homes before a Certificate of Occupancy can be issued. We offer 17 distinct energy services and expect to grow this number in 2007.
We thank you for your patronage of Midwest Energy and will continue to work hard to earn and retain your trust. Midwest Energy is committed to “Making Energy Work For You.”
